Audit 10780

2022-006 Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2021-003 Repeat Finding Since: 2021 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2205MN5ADM; 2022 Pass-Through Agency: Minnesota Department of Human Services (DHS) Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are completed in accordance with DHS reporting instructions. As part of the County’s reporting requirements for the Medical Assistance Program, the County submits the DHS Income Maintenance DHS-2550 report and the Social Services DHS-2556 report on a quarterly basis. Condition: For a portion of the year, salary and benefits for the Office Support Specialist position were allocated 30 percent to Income Maintenance costs on the DHS-2550 reports and 59 percent to Social Services costs on the DHS-2556 reports when the County's support indicated that it should have been allocated 33 percent and 53 percent, respectively. Additionally, revenues reported in the fourth quarter DHS-2556 report were understated. Questioned Costs: None Context: DHS relies on accurate reporting of program costs to ensure that resulting grant funds paid to the County are for applicable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Governmental Auditing Standards and Single Audits. Effect: Errors in the submission of costs on the quarterly reports can impair DHS’s ability to provide required oversight over federal programs and can result in the County receiving either more or less federal funds than can be justified based on the actual underlying activity. For the year, the errors identified resulted in expenditures on the DHS-2550 reports being understated approximately $4,100 and expenditures on DHS-2556 reports being overstated approximately $7,800. Revenues on the fourth quarter DHS-2556 report were understated by approximately $90,000. Cause: The expenditure allocation rates for the Office Support Specialist position were not updated in the payroll system at the beginning of the year and the support for the fourth quarter DHS-2556 revenues was generated before all receipts had been posted to the County general ledger. Recommendation: We recommend the County implement controls that ensure that the quarterly reports are completed accurately and in accordance with DHS guidance. View of Responsible Official: Acknowledge

2022-007 Reporting – LCTS Spending Report Prior Year Finding Number: 2021-004 Repeat Finding Since: 2021 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2205MN5ADM; 2022 Pass-Through Agency: Minnesota Department of Human Services (DHS) Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are accurate and completed in accordance with DHS reporting instructions. DHS instructions for the completion of the Local Collaborative Time Study (LCTS) Annual Spending Report indicate that the reported spending of LCTS funds should reflect the amount spent by recipients of the funds on the collaborative’s behalf. Condition: During the review of the 2022 LCTS Annual Spending Report, it was noted that the amounts reported as spent reflected funds paid to the recipient school districts rather than the spending of the funds by the school districts on the Hubbard County Social Services’ behalf. The classification of reported amounts into the specific spending categories was estimated based on set allocation rates rather than the actual uses of the funds. Support for the allocation rates used could not be provided. Questioned Costs: None Context: LCTS funding includes federal Medical Assistance Program funds. DHS relies on accurate submission of the LCTS Annual Spending Report to monitor and report on how LCTS funding is being used. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Governmental Auditing Standards and Single Audits. Effect: The LCTS Annual Spending Report was not completed in accordance with DHS instructions. Cause: The County’s method for reporting funds spent is based on past practice. Procedures have not been put in place to obtain necessary spending information from the LCTS funding recipients. Recommendation: We recommend the County develop a process to collect the necessary spending information from the various LCTS funding recipients to facilitate completion of the LCTS Annual Spending Report in accordance with DHS instructions. View of Responsible Official: Acknowledge

2022-006 Activities Allowed and Unallowed, Allowable Costs/Cost Principles, and Reporting Prior Year Finding Number: 2021-003 Repeat Finding Since: 2021 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2205MN5ADM; 2022 Pass-Through Agency: Minnesota Department of Human Services (DHS) Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are completed in accordance with DHS reporting instructions. As part of the County’s reporting requirements for the Medical Assistance Program, the County submits the DHS Income Maintenance DHS-2550 report and the Social Services DHS-2556 report on a quarterly basis. Condition: For a portion of the year, salary and benefits for the Office Support Specialist position were allocated 30 percent to Income Maintenance costs on the DHS-2550 reports and 59 percent to Social Services costs on the DHS-2556 reports when the County's support indicated that it should have been allocated 33 percent and 53 percent, respectively. Additionally, revenues reported in the fourth quarter DHS-2556 report were understated. Questioned Costs: None Context: DHS relies on accurate reporting of program costs to ensure that resulting grant funds paid to the County are for applicable federal program activities/costs and provide detailed information necessary for maintaining proper oversight over federal programs. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Governmental Auditing Standards and Single Audits. Effect: Errors in the submission of costs on the quarterly reports can impair DHS’s ability to provide required oversight over federal programs and can result in the County receiving either more or less federal funds than can be justified based on the actual underlying activity. For the year, the errors identified resulted in expenditures on the DHS-2550 reports being understated approximately $4,100 and expenditures on DHS-2556 reports being overstated approximately $7,800. Revenues on the fourth quarter DHS-2556 report were understated by approximately $90,000. Cause: The expenditure allocation rates for the Office Support Specialist position were not updated in the payroll system at the beginning of the year and the support for the fourth quarter DHS-2556 revenues was generated before all receipts had been posted to the County general ledger. Recommendation: We recommend the County implement controls that ensure that the quarterly reports are completed accurately and in accordance with DHS guidance. View of Responsible Official: Acknowledge

2022-007 Reporting – LCTS Spending Report Prior Year Finding Number: 2021-004 Repeat Finding Since: 2021 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2205MN5ADM; 2022 Pass-Through Agency: Minnesota Department of Human Services (DHS) Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are accurate and completed in accordance with DHS reporting instructions. DHS instructions for the completion of the Local Collaborative Time Study (LCTS) Annual Spending Report indicate that the reported spending of LCTS funds should reflect the amount spent by recipients of the funds on the collaborative’s behalf. Condition: During the review of the 2022 LCTS Annual Spending Report, it was noted that the amounts reported as spent reflected funds paid to the recipient school districts rather than the spending of the funds by the school districts on the Hubbard County Social Services’ behalf. The classification of reported amounts into the specific spending categories was estimated based on set allocation rates rather than the actual uses of the funds. Support for the allocation rates used could not be provided. Questioned Costs: None Context: LCTS funding includes federal Medical Assistance Program funds. DHS relies on accurate submission of the LCTS Annual Spending Report to monitor and report on how LCTS funding is being used. The sample sizes were based on the guidance from Chapter 11 of the AICPA Audit Guide, Governmental Auditing Standards and Single Audits. Effect: The LCTS Annual Spending Report was not completed in accordance with DHS instructions. Cause: The County’s method for reporting funds spent is based on past practice. Procedures have not been put in place to obtain necessary spending information from the LCTS funding recipients. Recommendation: We recommend the County develop a process to collect the necessary spending information from the various LCTS funding recipients to facilitate completion of the LCTS Annual Spending Report in accordance with DHS instructions. View of Responsible Official: Acknowledge